Goodbye FUD – The eternal scaling debate: Solution in sight

The last weeks and months have been anything but rosy for the crypto market. Falling prices and bad news have had a strong impact on the mood in the crypto ecosystem – FUD (Fear, Uncertainty and Doubt) made a big splash. In some reports, the impression was quickly gained that the crypto economy was at an end. We consider this a misjudgement and would like to outline in our 10-part article series why 2018 can develop into an outstandingly good year.

When asked about the classic advantages of crypto currencies over fiat currencies, the answers are usually the same: transactions with crypto currencies are anonymous and global, fast and inexpensive. The lack of intermediaries allows lower transaction costs and more efficient speed.

But the transaction fees in 2017 could not be called “low”. As a by-product of the exploding demand for crypto currencies (and the relatively early stage of the technology), transaction costs for Bitcoin transfers also rose. The blockchain scaled only to a limited extent and soon the rush had completely filled the blocks. What followed was price competition for inclusion in a block. That is, transaction costs rose.

Crypto currencies are means of payment according to the news spy

Here is the decisive point: As the name suggests, crypto currencies are basically conceived as currencies. Even before determining and storing value, the decisive function of a currency is its use as a means of payment. Long before the terms blockchain, crypto or distributed ledger technology were used in the world, Bitcoin wrote as a “peer-to-peer electronic cash system”. For the purists in the community, this aspect of the news spy crypto currencies is still in the foreground.

The Bitcoin price usually plays a secondary role for such purists. Finally one measures the exchange rate in Fiat. Satoshi Nakamoto developed Bitcoin just as a further development to the Euro, US Dollar & Co. – that is, to replace the traditional financial system.

How the current bear market is benefiting the Bitcoin secret

In order for Bitcoin to be used as a means of payment by a broad mass, the fees for a transfer must be correspondingly low. As time has shown since the beginning of January, a drop in prices is proving to be a blessing: If the value of the Bitcoin secret is halved, the costs of a transaction are also reduced – assuming that Bitcoin is used less.

If one wants to pay primarily with crypto currencies, it is absolutely necessary that the corresponding fees decrease again. For Miner this may mean a loss in the short to medium term. However, the low fees again motivate users to use the Bitcoin network for transactions. So the mining is worth it again.

Segregated Witness: Bitcoin’s solution for the scaling problem
Scalability still plays an important role in trading crypto currencies. In the Bitcoin community, it at least led to a deep split because no agreement could be reached on how to proceed. One part of the community wanted to achieve scalability by increasing the block size, which led to Bitcoin Cash. In contrast, the core team agreed to activate Segregated Witness.

Firstly, thanks to Segregated Witness, miners can store more transactions in blocks. Probably the most far-reaching scaling innovation Segregated Witness has brought with it is the Lightning Network. There are three noteworthy projects: Blockstreams c-lightning, Neutrino from Lightning Labs and Eclair. Eclair has recently published an Android Wallet. Lightning transactions have also been taking place in the Litecoin ecosystem for a long time.

So there are currently two sides working on a solution for the scaling problem. On the one hand the pressure on the blocks and thus also the hurdle for fast and favorable transactions of crypto currencies dissolves. On the other hand, technological innovations and updates that simplify the scaling of Bitcoin & Co. are being worked on with high pressure. Possibly look